Tiff Macklem says inflation spikes and global shifts demand preparation for future economic shocks
Bank of Canada Governor Tiff Macklem addressed the Greater Vancouver Board of Trade on Monday, stating that the central bank is preparing for a future marked by greater uncertainty and more frequent economic shocks.
According to Macklem, structural changes such as demographic shifts, technological advancements, decarbonization, and a move away from globalization are shaping the global economy.
“We need to use the pandemic experience to prepare for future crises,” Macklem said, according to the prepared text of his speech. He highlighted the importance of learning from the pandemic to improve economic resilience.
To achieve this, the Bank of Canada is conducting a review of its policy actions taken during the pandemic to restore financial stability and support the economy. The findings will be published alongside an assessment from an independent panel of experts.
Macklem acknowledged that the spike in inflation in 2022 served as a stark reminder that central banks cannot take public trust for granted.
“All of a sudden, people couldn’t afford the things they need. And while inflation is low once again, many prices are still a lot higher than they were before the pandemic. So, people feel ripped off. And that erodes public trust in our economic system,” he said.
The Bank of Canada has reduced its key policy interest rate five times this year, including a recent cut last week that lowered the benchmark by half a percentage point to 3.25 percent.
Macklem stated that the bank will assess the need for further interest rate cuts “one decision at a time.” He also noted that the central bank expects a more gradual approach to monetary policy if the economy progresses as anticipated.
Macklem’s speech comes ahead of Statistics Canada’s release of the November inflation report on Tuesday. Statistics Canada reported last month that Ontario’s annual inflation rate hit 2 percent, aligning with the Bank of Canada’s target.
As Macklem outlined, the central bank’s focus remains on ensuring stability while preparing for ongoing economic challenges stemming from structural and global shifts.
